Researcher: Give Employers More Skin in SSDI Game

One way to help the Social Security Disability Insurance (SSDI) reduce costs and get more beneficiaries back to work is to give employers stronger incentives to take their workers back.

Richard Burkhauser, a Cornell University economist, talked about that idea today at a House Ways and Means Committee Social Security subcommittee hearing on the future of the SSDI program.

Analysts have argued that the SSDI program has been facing serious problems.

Traditionally, SSDI has had a definition of disability that is stricter than the definition used by commercial group long-term disability insurers, but, in practice, the SSDI claim determination process has been unpredictable as well as slow, researchers have found.

Burkhauser, who is associated with the American Enterprise Institute, Washington, testified at the hearing that the Netherlands dealt with high use of the public disability insurance program there by restructuring the program in 2001.

Today, the likelihood that a Dutch worker will be collecting disability benefits is about the same as in the United States, Burkhauser said, according to a written version of his remarks posted on the Ways and Means website.

The Dutch government has reduced the number of people collecting disability benefits without shifting many of the recipients into other government programs, such as welfare programs, Burkhauser said.

The Dutch focused on keeping workers out of the disability program in the first place by making employers more responsible from keeping workers from entering the program in the first place, Burkhauser said.

"The reforms required all Dutch firms to fund the first two years of disability benefits to their workers and to pay an experience-rated disability tax based on the number of workers they subsequently moved onto the long-term Dutch disability insurance program," Burkhauser said. "These reforms provided incentives for employers, who are in the best position to offer accommodation and rehabilitation, to do so in lieu of moving workers with disabilities onto cash transfers."

Employers responded by buying more private disability insurance and also by improving efforts to get workers with disabilities back to work, Burkhauser said.

In the United States, Burkhauser said, SSDI program managers have been trying to give beneficiaries more incentives to return to work and to punish beneficiaries who are malingering.

The country might be better off by simply requiring all employers to provide 2 years of short-term disability (STD) insurance and giving those employers a financial incentive to get workers back to work, Burkhauser said.

In that system, he said, private STD carriers could do more to help with return-to-work efforts. "

Another strategy would be to make employers that fail to do a good job of getting workers back to work pay higher SSDI-linked payroll taxes, Burkhauser said.

"This is currently the system used to fund state workers’ compensation benefits," Burkhauser said.

"Alternatively, employers who provide short-term private disability insurance for employees and whose private insurance agents cooperate with SSDI gatekeepers in managing their cases could be granted a reduction in SSDI tax rates, while firms that did not offer such private insurance could be charged higher SSDI tax rates," Burkhauser said.

Burkhauser concluded that the United States has to get past the costly assumption that people who have disabilities are not capable of working.